CVS Health pharmacy business performs strongly, quarterly profit exceeds expectations

Special Report: Focus on US Stocks Q4 2025 Earnings

CVS Health announced on Tuesday that its fourth-quarter profits declined, but strong performance in its pharmacy benefit management division and an increase in retail pharmacy prescription volumes led to results that exceeded Wall Street expectations.

According to data from London Stock Exchange Group (LSEG), CVS's quarterly adjusted earnings per share fell from $1.19 to $1.09, higher than analysts' average expectation of $0.99.

The company's Chief Financial Officer, Brian Newman, stated: "I often talk about the 'say-do ratio'—we set pragmatic goals and strive to meet or even exceed expectations."

Newman noted that profits from the pharmacy business had declined by about 5% annually over the past five years, but after acquiring certain assets from Rite Aid, which had filed for bankruptcy, profits in that segment are expected to grow by 5% in 2025.

This healthcare group maintained its full-year 2026 adjusted earnings per share forecast at $7.00 to $7.20, consistent with the previous quarter. LSEG data shows analysts' average expectation is $7.17 per share.

CVS owns large US pharmacy chains, Aetna insurance, and CVS Caremark pharmacy benefit management company. After several quarters of underperformance and management changes in 2024, the company undertook cost-cutting and business restructuring in 2025.

Prescription Volume Growth Drives Revenue Increase

Driven by factors such as the Rite Aid acquisition, fourth-quarter total revenue rose from $97.7 billion to $105.7 billion, with prescription volume up 6.3% year-over-year.

The health services segment, which includes the Caremark pharmacy benefit management division, saw its fourth-quarter revenue rise from $47 billion in the same period last year to $51.2 billion.

Impacted by policies related to the Inflation Reduction Act, Aetna's medical loss ratio (the proportion of premiums spent on medical services) was 94.8%, lower than analysts' expectation of 95.5%.

Newman said that this legislation, enacted during the Biden administration, caused a sharp rise in medical costs for the company's Medicare Advantage business in the second half of last year.

Insurance companies specializing in Medicare (the US government health insurance program for seniors and disabled individuals) are facing revenue pressures due to increased demand for medical services and adjustments to government reimbursement policies.

Last month, the Trump administration proposed that the 2027 payment increases for Medicare Advantage plans would be much lower than expected, causing stocks of companies such as CVS, UnitedHealth Group, and Humana to fall.

In 2025, CVS announced it would stop offering insurance plans related to the Affordable Care Act, stating that the business was no longer sustainable.

Editor: Guo Mingyu